Serving Of Liquor Is Not A Charitable Activity, Income Tax Exemption Can't Be Granted: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that serving liquor is not a charitable activity and the income tax exemption cannot be granted.

The two-member bench of Yogesh Kumar (Judicial Member) and Shamim Yahaya (Accountant Member) has observed that the Commissioner of Income Tax (Exemption) has relied on various bills of the Appellant wherein the service of liquor has been mentioned. However, CIT(A) has not mentioned the details of the clarification/reply given by the appellant in the order and has not adjudicated the reply.

The appellant filed an application electronically on Form No. 10G seeking exemption under Section 80G of the Income Tax Act. The appellant was issued a letter dated March 26, 2019 requesting to submit certain documents in support of its claim of exemption under section 80G.

The appellant has filed a reply and, after considering the reply, the Commissioner of Income Tax (Exemption) held that the activity involving the serving of liquor cannot be considered charitable. The use of money collected from donors is to be utilised for the welfare of the general public, not for the enjoyment of people enjoying the state of affairs of the federation. The serving of liquor cannot be considered a charitable activity for the welfare of the general public. It was further held that, since the assessee failed to provide a proper explanation, the genuineness of the charitable activities could not be verified. Accordingly, concluded that the conditions for granting exemption under Section 80G are not satisfied and rejected the application for granting of exemption under Section 80G.

The department contended that the appellant had been serving the liquor, which emanated from the bills of the seminar along with hotel bills.

The ITAT noted that the order of the CIT(A) is a non-speaking one.

"We deem it proper to set aside the matter to the file of the CIT(Exemption) to decide the matter afresh in accordance with law and pass an appropriate speaking order. Needless to say that an opportunity to be heard be given to the appellant herein. Accordingly, we allow the Assessee's grounds of appeal for statistical purpose," the ITAT said.

Case Title: Federation of Delhi Textile Merchants Versus Income Tax Officer

Citation: I.T.A. No. 7807/DEL/2019

Date: 18.07.2022

Counsel For Appellant: None

Counsel For Respondent: Sunita Verma

Click Here To Read The Judgement